Recently launched, the first bitcoin savings accounts to be made accessibly by a company with two different CFTC licenses lets investors earn a yield in fiat on their bitcoin holding. Instead of waiting for the cryptocurrency to appreciate, the LedgerX Savings product allows investors to do what’s called a call overwrite.
The investing method, where a person puts in bitcoin to LedgerX then sells a call option at a marginally longer date, with a higher strike call option, has been said as one of the New York City-based startups most widely-used services using the current options service.
However, with the new savings product, that process is lessened to its most basic point-and-click functionality, made in part to make it easier for less sophisticated bitcoin bulls to receive a premium in U.S. dollars for selling the option.
The options contracts would be offered initially for transactions over a three-month duration and a six-month duration, and LedgerX is levying a transaction fee for each service.
LedgerX president, Juthica Chou, expects to see high volumes on this product, as it was designed to serve the use-patterns of LedgerX’s existing customers. She projects that more than half the company’s volume is gotten from using similar techniques, but following a much more complex procedure.
Over the past three months, LedgerX has averaged $30 million in notional transactions per month, with an average trade size is $60,000, she said. 70% of that volume is claimed from options, with the rest being swaps.
In a potential sign the bitcoin users are looking for more ways to both place long bets and short the cryptocurrency that is currently valued at $149 billion, Chou states 20% of the company’s volume since it launched has been generated in the past three weeks. However, over that same period, the price of bitcoin has dropped by 5% percent, from $9,191 on April 24 to $8,715 today. At its peak price last year, a bitcoin was trading for nearly $20,000.
While Chou says it is exactly this unpredictability that makes the call overwrite such a potentially attractive investment opportunity, she admits the unpredictability might not be attractive to everyone.
“This interface will definitely be skewed to the long bitcoin holders,” she said, “who will likely only deposit bitcoin and who will want to earn interest off of that bitcoin.”